The court emphasized the importance of giving the appellant an opportunity to prove his status and examine his contention as the second seller before re-determining tax liability, penalty, and interest.

This is an appeal against the order of Assessing authority dated 20.10.2000 & that of the 1st Appellate Authority dated 22-5-2004. The brief facts of this case are that the carriage of Khair wood togs worth Rs.23,30,000/- during the years 1996-97 & 1997-98 respectively, out of the territory of Bilaspur M.P. Barrier at Naina Devi, came to the knowledge of Assessing Authority of Bilaspur District. This much quantity of logs wood was sold to M/s Mahesh Katha Udyog of Una. The declaration about the carriage had been made in the Form of ST-XXVI at Barrier. On this information the mandatory notice under section 14(6) of H.P. General Sales Tax Act 1968 was sent to the appellate, but as the appellant did not co-operate so the assessment was done ex-parte on 20.10.2000. The assessing Authority raised a demand of Rs.42,000/- as tax Tax.8,000/, as penalties u/s 14(6) and u/s 35(2) for the years 1996-97 and Rs.3,12,000/- as tax, Rs.48,000/- as penalties u/s 14(6) and I 35(2) for the year 1997 & 1998 respectively. In fact the appellant used to purchase I standing trees of Khair Wood from the Jamindars and used to process the wood of these trees, which included (felling, cutting and making of loss) and then used to sell it to Katha Factories. Thus the act of the appellant was taxable being the first seller. The first appellate authority though upheld the earlier order, yet decreased taxable turnover of the appellant, by 10% and remanded the cases for taking the correct figures of taxable turnover. The appellant has come in appeal on the following grounds:-

1. That the appellant was never given an opportunity to prove his status with respect the disputed transactions and an exparte assessment was done illegally.

2. That a single notice u/s 14(6) was issued illegally for two years of assessment and the assessment has been done of the dealer being a registered dealer instead of unregistered dealer.

3. That the assessing Authority could not establish the appellant as dealer liable to pay sales tax before framing the assessment.

4. That during the year 1996-97 the sales tax liability has wrongly been fixed w. e. f. 1.3.1997 as on that day the sales of the appellant were proved to have been amounting to Rs.2,70,000/- i.e., below the threshold limit of Rs.3 lacs and similarly during the year 1997-98 the tax liability has wrongly been fixed, as the entire sales were conducted between the period 1.5.1997 to 19.5.1997.

5. That the turnover had wrongly been taxed at full rate, despite the fact that the entire sales were made against R.M-1, as this were issued by the M/s Mahesh Udyog.

6. That the appellant has wrongly been treated as manufacturer/processor. The total amount of consideration received by the appellant was inclusive of substantial amount of labour charges and carriage charges.

7. That even if the contention of the State is taken as correct, the appellant has purchased trees and he is the second seller and the liability is that of the 1st seller and the 1st sale is tax-free under item No. 26 of the Schedule. The Stand of the respondent is:- (a) That the appellant was given full and sufficient opportunity to prove his status. The status of the appellant was clear from the documents i.e., the application of the appellant filed before the Forest Department at the pre-felling stage of the trees, discloses that he had purchased the standing trees from the growers. The memorandum of appeal before the 1st Appellate Authority also reveals that the appellant had claimed that he used to purchase standing trees from jamindars and later convert the into logs before selling to the Katha Factory. The memorandum dated 10.7.1996, issued by the forest department contained similar type of evidence showing that the appellant had purchased the standing trees of khair and he used to process it. The permission given by the forest department confirmed the same stand of the respondent department, which contained the conditions in the memo issued by the forest depar